FOR MORE HOMEOWNERS, THREAT FROM LIGHTNING IS A WORRY

The cost of homeowners' claims for damage due to lightning strikes is soaring because of the burgeoning number of high-end electronic items and appliances in the average home, insurers say.

Hartford Financial Services Group Inc. says that the cost of claims the company paid due to lightning strikes rose 77% between Jan. 2001 and July 2006, even as the number of claims fell in the period by nearly half. Some of the nation's largest insurance companies, including State Farm Insurance Cos. and Nationwide Mutual Insurance Co., also say they're experiencing a similar trend.

Insurers partly attribute the higher losses to the growing number of home-theater systems, plasma and high-definition television sets, game consoles and personal computers in the average American home -- which all can be fried by a surge of voltage in a home's electrical wiring that can occur from a lightning strike. Rising rebuilding costs are also a factor because in the worst instances, lightning torches the house either from overloading appliances or from a direct hit.

A State Farm spokesman says the company believes policyholders are filing fewer claims for lightning damage -- and other losses -- because of fear their rates will go up. But the claims they do file are larger.

Janice Dlatt, of Buffalo Grove, Ill. learned about lightning the hard way. She and her family suffered $10,000 in losses when a lightning strike burned out their hard-wired home-alarm system, heating and air-conditioning system, ceiling fans, TVs, VCRs and phones. "I consider ourselves lucky because my house didn't burn down. It was a small strike with a lot of voltage. It actually hit the flue from the furnace on the roof," she says.

Lightning strikes in the U.S. also cause an average of 6,100 residential fires and $144 million in direct property damage, according to the National Fire Protection Association, a nonprofit code- and standard-setting group.

Homeowner's insurance policies cover damage from electrical storms, less the deductible, but insurers say much of it could be avoided with the proper precautions.

A lightning-protection system can help save your gadgets and your house and in some places, may be a requirement under local building codes. The system, which provides a safe path for electricity to follow and discharge, should be installed by a qualified and licensed electrician and in compliance with local building codes and guidelines of the National Fire Protection Association (NFPA standard 780) and Underwriter's Laboratories, the safety organization. The system includes a lightning rod or air terminals at the top of the house that can be disguised to look like a weather vane and wires to carry the current down to grounding rods at the bottom of the house. Installing such a system costs about $1 to $1.50 per square foot for the average U.S. home.

A whole-home surge arrestor installed near the main circuit-breaker panel or the electric meter helps prevent excess voltage from passing through the house's wiring, damaging electrical equipment and possibly starting a fire. A whole-house arrestor system, which averages from $150 to $500, is also a job for a professional electrician.

As for doing it yourself, surge suppressors that you plug into electrical outlets help prevent excess voltage from damaging specific appliances and equipment. True surge suppressors shouldn't be confused with ordinary power strips that don't offer protection. Surge suppressors cost an average of $12 to $30 in hardware and appliance stores. They should have a label that reads UL standard 1449 and have a suppressor voltage rating, or SVR, of 330 volts. The lower the SVR number, the better the suppressor will be at protecting appliances and electronics.

Suppressors deteriorate with age and after a surge. Some have audible signals or flashing lights to indicate when they have worn out and should be replaced.

"If you are going to pay $2,000 for a new TV, spending $20 for a new surge suppressor is a good investment," says Richard Roux, senior electrical engineer at the NFPA.

A simple solution would be to unplug your devices before electrical storms. And to cut your chances of being shocked yourself during a storm, avoid using electrical appliances, corded phones and plumbing during lightning and thunder, safety experts say. It's safest not to shower, do laundry or wash dishes, either. Electrical storms are most likely to occur during the summer and in the South and Southwest, but occur across the U.S. and throughout the year.

-- November 22, 2006

By M.P. McQueen

The Wall Street Journal Online

FUTURE HOME BUYERS DETERMINE REAL ESTATE TRENDS

Study: More buyers to be young minorities

The most significant factors impacting housing over the coming years are whether aging baby boomers decide to grow old where they are and where young immigrants decide to settle, according to a new study released today by the Mortgage Bankers Association.

The study, "America's Regional Demographics in the '00s Decade: The Role of Seniors, Boomers and New Minorities," conducted by William H. Frey of the Brookings Institution and sponsored by the MBA's Research Institute for Housing America (RIHA), analyzes two components driving the changes that will transform the U.S. population over the next several decades -- aging boomers, and immigration of Hispanics and Asians.

It finds that the overall U.S. population will experience a rapid aging as boomers grow older, while absorbing large numbers of young recent immigrants. Different regions of the country will have different demands for housing driven by the relative impacts of aging in place versus migration within the country and immigration from abroad. For example, suburban areas will gray faster than urban areas due to the boomers aging in place.

"It has been said that demographics are the future that has already happened and demographic changes are one of the most powerful forces impacting the residential and commercial real estate and real estate finance markets," said Doug Duncan, MBA's chief economist and senior vice president of research and business development. "We expect that this study will help our members develop business plans to meet the ever changing American marketplace."

Key findings from the study include:

Regional Differences in Aging Patterns

• Senior populations can increase through in-migration or through aging in place. However, aging in place is the dominant force that will shape demographic changes in the years ahead.
• Even in Arizona, which shows the highest rates of net in-migration, the migration effect is dwarfed by the effect of the existing population simply getting older and not moving.
• The most dramatic impact of aging in place will be in parts of the country that are not now associated with aging populations, like Nevada, Colorado and Georgia. These states that will exhibit the fastest senior growth are not necessarily the ones that have the highest percentage of seniors. States with high senior shares have typically experienced one or more decades of sustained declines in their younger populations. This leaves behind seniors who are far less likely to move than people in their 20s and 30s.
• Suburbs will be the fastest graying part of our national landscape. In projections of Philadelphia and Chicago, for example, suburbs will begin to age faster than cities, even though both cities start out having older populations than their suburbs.
• While close to 30 percent of young households move each year to a new residence, that percentage slides down to the 4-5 percent range for people in older age groups. Therefore, household mobility, which has been a major driver of home sales, will fall off as boomers age.
• Less than 2 percent of residents aged 55–64 move across state lines in any one year, and the percentage is even less for those over 65. The aggregate number of interstate moves among those aged 55 and over is dwarfed by the number of moves undertaken by the younger population, meaning fewer moves as a larger portion of the population is over 55.
• Well-off young senior populations will emerge in areas like Las Vegas, Denver, Dallas and Atlanta.

Greater Dispersion of Minorities

• While it is popular to think of the United States as a melting pot, Hispanic, Asian and other minority groups are disproportionately clustered in selected areas.
• What has changed is the "hold" that the traditional immigrant gateways have on the Hispanic population. In 1990, the top 10 metropolitan areas were home to fully 55 percent of all U.S. Hispanics, and the top two, Los Angeles and New York, housed nearly three in 10 Hispanics nationwide. In 2005, however, less than half of all Hispanics live in the top 10 areas, and Los Angeles and New York are home to only 22 percent. When one examines the far reaches of Hispanic dispersion nearly one third of all counties in the United States have at least 5 percent of their populations that are Hispanic, compared with one out of 6 in 1990.
• The vast majority of Hispanics and Asians speak English at home, and those who do not can communicate in English very well.
• These new minorities are also relatively young compared with the rest of the population, suggesting that racial generation gaps are emerging in areas where they live in large numbers. That is, young adults up to age 40 in these areas show a strong representation of new Hispanic and Asian households, whereas the "over 40" crowd is still dominated heavily by white and black baby boomers.
• Minorities tend to be younger and as such are highly mobile. Four out of 10 young Hispanics or blacks changed residence over the 2004-05 period. Nearly one out of 10 Hispanics, and more than one out of seven Asian movers, came directly from abroad.
• Overall, 15 of the nation's 88 large metropolitan areas have majority minority populations.

New Regions Defined by Demographic Changes

• "New Minority States" where Asians and Hispanics currently account for about one-third of the population: New York, New Jersey, Florida, Illinois, Texas, New Mexico, Arizona, Nevada and California.
• "Faster Growing States" contain many suburban communities and attract migration from the rest of the country as well as from recent immigrants. This group of states will have the highest rate of growth for the 55-and-over population: New Hampshire, Maryland, Virginia, North Carolina, South Carolina, Georgia, Tennessee, Colorado, Utah, Idaho, Oregon and Washington.
• "White-Black Slower Growing States" and "Mostly White Slower Growing States" will have the lowest rate of overall population growth, but will gray rapidly through aging in place, and will have the highest shares of seniors: Ohio, Michigan, Alabama, Mississippi, Louisiana, Arkansas, Missouri, Washington, D.C., Maine, Vermont, Massachusetts, Connecticut, Rhode Island, Pennsylvania, West Virginia, Kentucky, Indiana, Minnesota, Wisconsin, Iowa, North Dakota, South Dakota, Nebraska, Oklahoma, Kansas, Wyoming and Montana.

***

Monday, November 27, 2006

By Inman News

TIPS FOR SAVING MONEY ON YOUR HOT-WATER BILLS

When the days grow nippy, nothing beats a long, hot shower to warm things up. But at what expense? The Department of Energy says water heating accounts for 14% to 25% of the energy consumed in your home. Here are tips from the department for reducing your water heating bills:

• Set the thermostat on your water heater to 120° F. If you lower it by just 10ºF, you'll save 3% to 5%. For most homes, 120 ºF, or even 115 ºF, is sufficient.
• Consider getting a more efficient water heater for your home. Natural-gas-on-demand or tankless water heaters can save you up to 30% compared with standard natural-gas storage tank water heaters. Or, just buy a new energy-efficient water heater. It costs more up front, but you'll save over time.
  
• If you buy a solar water heater, you might be eligible for a tax credit or rebate. Look for details in the Database of State Incentives for Renewable Energy at www.dsireusa.org.
  Drain a quart of water from your tank every three months. You'll remove the sediment that lowers the efficiency of your water heater.
  
• Place heat traps on the hot and cold pipes connecting to your heater -- you'll prevent heat loss.
  
• Insulate your hot water pipes -- doing so can raise water temperature 2ºF-4ºF.

-- November 16, 2006

By Marshall Loeb
The Wall Street Journal Online

DECLINING AFFORDABILITY PUSHES
HOMES OUT OF REACH FOR SOME

Despite low mortgage interest rates, a smaller percentage of first-time home buyers are entering the market, according to an annual profile of buyers and sellers released by the National Association of Realtors on Saturday.

During the year ending in June, 36% of all buyers who purchased a home were first-time buyers, according to the association's annual profile of home buyers and sellers. That's down from 40% a year ago. About 7,500 buyers and sellers were surveyed.

Part of the reason for the declining share of first-time homeowners: Declining affordability for those entering the market after the housing boom of the past couple years bumped up home prices, said David Lereah, the NAR's chief economist, during a news conference held at the Realtors' annual convention here. A greater number of second-home sales also may have contributed to a lower percentage of first-time buyers overall.

"I hope that it's not a trend. I hope that as affordability starts to improve we see more first-time home buyers," he said. "It's critical for the housing sector."

The percentage of single female home buyers, however, inched up in the survey to its highest level on record. Twenty-two percent of all home buyers were female and on their own, up from 21% a year ago and up from 14% in 1995. In comparison, single males accounted for 9% of home buyers, unchanged from last year.

Other statistics helped validate the jobs of the thousands of Realtors at the convention: 80% of home buyers said they used the Internet to search for a home, but 85% relied on a real-estate agent as a source of information about homes for sale. And 36% first learned about the home that they purchased from an agent, versus the 24% who learned about the home that they purchased online. Among those who used the Internet to search for a home, 81% purchased a home using a real-estate agent.

Although real-estate agents were leery of the Internet 10 years ago, fearing it would take away business, 80% of firms now have their own Web sites, Lereah said.

"What the Internet has done for consumers, potential buyers, is provide them with information, give them a comfort level," he said. "But it all comes down to you're making the biggest financial transaction you're ever going to make for 99% of these people -- and they need guidance, they need someone they can trust and who has been through this before."

From the seller's side

Reflecting the beginning of a softening market, sellers had their homes on the market for a median of 6 weeks, according to the report, an increase from the 4-week median reported a year ago. "It makes some sense: We had a boom in 2005, and in this time period, we're coming to a close and beginning to stall," Lereah said.

The typical home sold for 98% of the listing price in this year's report; it sold for 99% of its listing price a year ago. But even in this year's figures, 12% of homes sold for more than its listing price.

Nineteen percent of sellers said that the primary reason for selling their home was because it was too small, while 13% said the neighborhood was less desirable and 10% decided to move so they could be closer to their job. The typical home seller owned their home six years.

Twelve percent of sellers said they sold their home without a real-estate agent, down from 13% a year ago and 20% -- the report's recorded high -- in 1987. Of those who sold their home on their own in this year's survey, 40% said they sold the property to someone they already knew.

Of those who did use an agent, 73% used a full-service agent, 8% used a discount broker and 7% used a minimum-service agent who may have done as little as list the home on the Multiple Listing Service, the survey found.

"Limited and minimal brokerage services cater largely to owners who would prefer to sell on their own but recognize they need some level of professional help," Thomas M. Stevens, president of the National Association of Realtors, said in a news release. "These services generally are a good match for certain consumers, and help to explain a decline in owners selling purely on their own."

-- November 20, 2006

By Amy Hoak

Marketwatch

HOUSE-RELATED READS FOR THE HOLIDAY SEASON

The holiday season is upon us, twisting our brains with the usual worries about what to give our loved ones. Fortunately, a book is one-size-fits all gift, and even more fortunately, there are a few new ones out on home-related topics that are worth giving:

"Manspace," by Sam Martin (Taunton, 2006). For the red-meat-eater on your list, this book focuses on guyspace, the few places left over in a home once the females finish decorating -- areas like garages, spare bedrooms, unfinished attics and outbuildings. So what do these men do with these spaces? Why decorate them, of course, and sometimes quite cleverly (one fellow put a concrete climbing wall in his home office; another a boxing ring in his garage). But not all of the décor drips testosterone: for instance, one man put a red velvet couch in his stable-turned-photographer's studio and trimmed the eaves with fleur-de-lis gingerbread. In all, a book that's funny and imaginative enough to pull the reader away from ESPN, at least for a little while.

"Where We Lived," by Jack Larkin (Taunton, 2006). Like all good coffee table books, this tome has fabulous pictures -- in this case, dozens of photos of early American houses, ranging from tumbledown shacks to mansions, taken from the Historic American Building Survey, a project launched during the Depression to help out-of-work photographers. But unlike most coffee table books, this offers fascinating text as well as an exhaustively researched, yet never boring glimpse at how Americans lived just a few generations ago. When Mr. Larkin, a historian and professor, describes how an 18th-century gentleman visitor suffered living with 12 other people in the four-room house of his host, we can almost hear the loom rumbling and clacking, smell the stench of rarely-washed bodies in close quarters and feel the lice crawling. But while Mr. Larkin doesn't shy away from the most delicate topics, like outhouses and chamber pots, he always handles them with warmth and humor. For instance, he writes this about chamber pots, which were often given as "bawdy wedding presents": "It has earthy verses on both sides that clearly celebrate married sexuality, a green ceramic frog climbing over the top, and a painted face on the bottom exclaiming, 'Oh Dear Me! What Do I See?' and 'Keep Me Clean and Use Me Well, and What I See I Will Not Tell.'"

"Home: The Blueprints of Our Lives," by John Edwards (Collins, 2006). Yes, he's probably running for president, and yes, writing a heartwarming book about one's humble origins has become a rite of passage for presidential hopefuls...but that doesn't negate the fact that this is a heartwarming book. That's partly because the former Senator from North Carolina hasn't kept the spotlight on himself. Instead, like a certain former Senator from Massachusetts who also wrote a book before running -- successfully --for president back in the '60s, Mr. Edwards shifts the focus to others like John Glenn, Maya Lin and Steven Spielberg, all of whom have contributed chapters on their early memories of home.

Not surprisingly for a politician, Mr. Edwards' own memories aren't very colorful or revealing ("for me, home isn't the little two-bedroom brick house in Seneca on Mountain View Road; it's my mother crying as I leave for my first day of school..."). But many others are, and some, like that of musician Nanci Griffith's memories of her grandfather's house, are hilarious and worth the price of the book: "Every day my grandfather would have sardines and pinto beans for lunch. Sometimes after lunch he would tell my grandmother he was taking me to the library. We'd head downtown to Sixth Street, which back then was all old piano bars and domino parlors. When I started school and he took me to the actual library, my first reaction was 'This isn't the library.'"

-- November 20, 2006

By June Fletcher

Real Estate Journal Online

HOUSING CORRECTION HAS FURTHER TO RUN, REALTORS PREDICT

The housing market correction has further to run, with new-home construction expected to fall another 12% next year, a real estate industry group said Friday in an updated forecast for 2007.
While the market for existing homes will probably flatten out, the new-home market will probably continue to slow through next year, said David Lereah, chief economist for the National Association of Realtors.

Sales prices are expected to rise slightly. "Given the huge gains in home values during the housing boom, and this year's rise in housing inventory, overall price gains this year and next will be modest," Lereah said. Median existing-home prices are expected to rise 1.7% next year, while new-home prices are expected to rise 1.3%.

Housing starts will probably fall about 12% next year to 1.63 million after falling 11% this year, he said. Starts totaled 2.07 million in 2005.

The NAR forecast for housing starts for 2007 is close to the Blue Chip consensus forecast of 1.62 million. The Blue Chip forecast is derived from the forecasts of 54 economists surveyed by the publication Blue Chip Economic Indicators.

New-home sales will probably fall 8.7% next year to 975,000 after plunging about 17% this year, the realtors said.

Existing-home sales will probably fall 0.6% to 6.43 million next year after sinking 8.6% this year, he said, adding that sellers are becoming more realistic.

"We now have the most favorable market for home buyers in several years," Lereah said.

-- November 13, 2006

By Rex Nutting

Wall Street Journal Online

WHAT TO DO WHEN A BUILDER OFFERS TO FIND YOU A LOAN

Thinking of buying a new home in this softer market? Chances are your builder is going to try to sell you a mortgage.

Builders have long encouraged their customers to use their mortgage affiliate for financing, and not just to make a little extra money. It also gives them control of the transaction, making it less likely that a mortgage snafu will create problems at closing. Now, as sales slow and cancellations rise, builders are increasingly rolling out special deals that may be tied to using their affiliated lender.

But you may well be able to find a better deal on your own. Builders' mortgage offers "clearly are worse in all the cases I've seen," says Jack Guttentag, professor emeritus at the University of Pennsylvania's Wharton School and founder of the mortgage-advice Web site www.mtgprofessor.com.

When Randy Gowler, a Olathe, Kan., architect, wanted to buy a new four-bedroom home this year, the builder offered to pick up the first $8,500 in mortgage payments. The catch: Mr. Gowler had to use the builder's affiliated lender and pay the full $287,000 asking price. Mr. Gowler crunched the numbers and turned down the deal. Instead, he went with an outside lender that offered a lower interest rate and paid $274,000.

Unlike Mr. Gowler, most home buyers stick with the builder's lender. Pulte Homes Inc. says Pulte Mortgage provides financing for 90% of its buyers who need a mortgage. Centex Mortgage finances 80% of Centex Corp. customers. Most builders either have a mortgage affiliate or preferred lenders they work with.

Builders say their rates are competitive and that their mortgage affiliates give them more control over the sale. Indeed, getting a loan through your builder can be a plus if construction is delayed, says Greg McBride, a senior financial analyst with Bankrate.com, because a builder's mortgage unit is more likely to be flexible if there are construction delays.

As the housing market has cooled, many builders have sweetened the pot with special deals. A September survey conducted by the National Association of Home Builders found sharp increases from last year in the number of builders offering to pay closing costs and other fees and in those reducing home prices.

In many cases, home buyers must use the builder's financing arm to qualify for these offers. That's particularly true if the incentive is mortgage-related, such as when the builder pays closing costs or picks up several months of mortgage payments. Buyers may also be required to use the builder's mortgage unit to qualify for a reduced purchase price, builder upgrades or other concessions.

Some competitors say that these requirements put buyers at a disadvantage. "They prevent consumers from shopping to see if there's a better deal out there," says Marc Savitt, vice president of the National Association of Mortgage Brokers. The savings from incentive programs are often illusory, he says, because the home buyer is charged a higher mortgage rate or more in fees and closing costs by the builder's mortgage affiliate.

The builders disagree. "This is really about special interests trying to limit competition -- and increase their profits -- by legislating home builders out of the mortgage business," the National Association of Home Builders said in a statement.

Federal rules prohibit builders from requiring that home buyers use their mortgage affiliates. The rules also require that any discounts offered to buyers who use these affiliates must be true discounts and not made up through higher charges elsewhere.

The Department of Housing and Urban Development says it is getting more complaints not only from mortgage brokers, but also from consumers. One builder canceled a purchase contract and refused to return an $11,845 down payment after the buyer decided to use an outside lender. After HUD intervened, the builder's mortgage company agreed to buy down the rate to make the loan more competitive. Another builder agreed to waive $5,360 in mortgage-origination fees that a buyer was being required to pay in order to qualify for $13,450 in incentives.

To make sure you're getting a good deal, ask the builder not only for the mortgage rate, but also for details on closing costs, points, any fees that will be paid to the lender or third parties, and the terms of the loan. Prof. Guttentag advises comparing that offer to a quote for the same mortgage obtained on the same day from an online lender. He also suggests shopping for financing at the same time you look at houses.

Whether the builder's deal is worth taking can also depend on how long you plan to stay put. A slightly higher mortgage rate may not be a problem if you plan to move in a few years, but it could wipe out the benefits of any incentives if you plan to stay in your home longer. You should also check what comparable homes are selling for to determine whether the builder is offering a real discount.

It can pay to negotiate. When Scott Lazaroff, an engineer, bought a new home in Lyons, Colo., in September, the builder offered to knock an extra $15,000 off the price if Mr. Lazaroff used its affiliated lender. He decided to use his own lender, but still convinced the builder to reduce the price by $10,000. Dan Gracey, another Colorado home buyer, said his builder came back with a lower mortgage rate after he "pushed back" on its original offer, which was higher than the competition.

Jonathan Clements is on vacation.

-- November 13, 2006

By Ruth Simon

Wall Street Journal Online

NAR: HOUSING SPIRAL MOSTLY OVER

NEW ORLEANS -- The worst of the housing downturn is over for three-quarters of the country, the National Association of Realtors' top economist said here earlier this month.

Noting that like politics, "all real estate is local," David Lereah, the chief economist of the nation's largest trade organization, said 74 percent of the nation's housing markets will once again be expanding "in a sluggish way" in 2007.

Mr. Lereah divides the country into five "divergent" sectors:

• Non-Boom Stallers, or places which never participated in the housing boom which began 15 years ago
  
  
• Non-Boom Gainers, or markets which didn't participate in the boom but grew nevertheless.
  
  
• Boom Lites, or markets which shared only slightly in the boom.
  
  
• Average Boomers, or places which took part in the explosion but only on an average basis.

Hot Boomers, or places where house prices jumped out of sight.
Only the last group, which represents 26 percent of the country, still has a ways to go to work their way back to normal, Lereah said at NAR's annual convention here. "The correction is pretty much over with" for the rest, he added.

The economist would not hazard a guess as to how low prices would need to fall in the most overheated markets or how long it would take for them to hit bottom, saying it would be "pure speculation" on his part or that of anyone else.

But he did say that the places where speculators were most active will be the ones that take the longest to work their way back to equilibrium.

He also said price corrections should be welcomed, not feared. "What gives health to the economy is sales -- the number of transactions -- not price," he said. "Every 1 percent drop in prices qualifies 50,000 more potential purchasers."

"We now have the most favorable market for home buyers in years," Lereah said, noting that sellers are starting to be "more realistic about current market conditions" and pricing their properties more appropriately for the downturn.

"Conditions for buyers have improved because sellers are flexible now and mortgage rates are near historic lows," he said. "And sellers who have been in their homes for a normal period of ownership are still seeing very healthy returns on their investments."

Lereah expects existing home sales in 2007 to "coast" at roughly the same level as this year, which, despite a projected 8.6 percent decline to 6.47 million, will go down as the third best year on record.

New home sales, on the other hand, should fall 8.7 percent to 975,000 units, largely because many builders have slowed their pace of construction, according to the NAR economist. Such a decline would be on top of the expected 17.8 percent drop to 1.07 million units this year.

Despite the slow down, however, Lereah is still predicting slight increases in housing prices. For this year, he says the national median for existing homes should rise by 1.9 percent, to $223,700.

And for 2007, he expects a 1.7 percent increase to $227,500.

New homes prices, on the other hand, should slip by 1.1 percent this year, to $238,400, and then go back up 1.3 percent next year, to $241,400, he said.

Published: November 13, 2006

By Lew Sichelman

Realty Times

BANKERS SAY PEOPLE WHO BORROW AGAINST HOME EQUITY ARE THE CREDIT ELITE

If you’re one of the millions of Americans with a home equity credit line or a second mortgage loan, you are almost certainly among the nation’s credit elite.

A new study by the Consumer Bankers Association found that the average home equity borrower this year has a FICO credit score of 730, a household income of almost $90,000, a home worth $337,000, and an existing first mortgage of $169,000. The average new equity credit line taken out this year has been for $84,812, while the average home equity loan or second mortgage has been for $57,800.

Home equity borrowers typically have sound financial management purposes in mind when they tap their home equity, according to the study. Fully 53 percent of new equity loans this year have been for refinancing existing debt -- typically higher-cost consumer debt -- and 16 percent were intended primarily for major home improvements. Another 15 percent of borrowers said they took out equity loans to help purchase additional real estate -- a second or vacation home or investment property.

Equity loan borrowers tend to be older on average than the general population -- 73 percent were between 35 and 64 this past year -- but youthful equity-tappers are a growing segment of the market as well: Thirteen percent of new borrowers are homeowners between 20 and 34 years old.

Consumers with equity lines and loans are exceptionally disciplined in paying back the bank. Just 0.6 percent of equity loan borrowers and 0.76 percent of credit line customers were late on payments during the past year. Both rates are below prevailing delinquency rates for conventional first mortgages, and far below subprime delinquency rates on primary home loans.

But the performance of equity loan customers has begun to diverge sharply from the performance of equity credit line customers. Equity loan borrowers’ delinquency rate of 0.6 percent was down significantly from 0.92 percent in 2005 and 1.3 percent during 2004. Credit line borrowers, by contrast, are showing signs of rising delinquencies. Their 0.76 percent rate for 2006 was up dramatically -- by 73 percent -- from their rate of 0.44 percent in 2005 and 0.46 percent in 2004.

The likely cause: credit lines predominantly have carried floating rates tied to the Wall Street bank prime rate, which has risen steadily for nearly two years in the wake of the Federal Reserve Board’s ratcheting up of short-term rates. Credit line customers who took out lines at 4 percent during 2004 are now often paying 8.5 or 8.75 percent a month -- pushing them to search for alternatives.

As a result, the hottest trends among banks offering credit lines are various programs designed to convert portions -- or the entirety -- of floating-rate lines into fixed-rate lines or loans. For example, the Bank of America, Wells Fargo, Citicorp, and JPMorgan Chase all permit any of their credit line customers to convert portions of their outstanding balances to fixed-rate, usually at no cost.

Top executives of each of those banks say their new flexibility on credit lines is intended to discourage credit line borrowers from refinancing their first mortgage and “cashing out” enough additional money to pay off their rising-cost lines. A secondary purpose is to keep borrowers out of delinquency trouble.

“Even though these are some of our very best customers,” says Doreen Woo Ho, president of Wells Fargo Consumer Credit Group, “we have to be sensitive to their financial needs as (short-term) rates increase.”

Published: November 6, 2006

By Kenneth R. Harney
Realty Times

HOW TO HOLD TITLE

A great teacher taught me years ago that many of the nuances of real estate law only matter when it matters. How you hold title is one of those nuances and it really matters when it matters.

Consider the case of one of our distraught readers whose significant other had placed both their names on the title in Joint Tenancy more than three years ago. Just a few months later, the relationship went south, and the significant other wanted to switch everything back the way it was before the Joint Tenancy agreement.

The problem was this reader pointed out that she had "made monetary contributions to ALL the upgrades done within the house, paying for 90 percent of the total renovations done which has increased the value of the property as well. I contributed to the household over the years I was there, but did not specify that these funds went to the mortgage, and these funds went to whatever. I just want to be fairly compensated for my "loss." As a Joint Tenant, technically I am entitled to 50 percent of the equity, right? I am not on the loan. Help and fast. He sent me a letter from a lawyer and I want to make sure I know what I am talking about before I respond."

There are several ways of holding title to property and if what this person wrote is correct, asking for a quit claim deed is not one of the guaranteed 50 ways to leave this lover without an interest in the property, or at least a court appearance.

In a married situation, the joint tenants form of holding title is the most popular, as the property then passes to the surviving party in case of death without being left in a will. The form of title is established to create such a passing on of property. Thus, our spurned owner above, actually has a legal foot to stand on with the financial support provided in the property -- but primarily, because of the form of title -- to be able to receive some sort of remuneration following the impending break up of the relationship. Her best move is to take it to court.

Though joint tenancy is the most popular form of title used among married couples, it doesn't mean that the ownership title is for only two people. If, for instance, you go into a business transaction to invest in property with a couple of investors, this may be a form of ownership you would want to use so that the ownership passes back to the other owners if one of the partners dies.

However, if an investor desires to pass property on to his or her heirs at his or her death, joint tenancy would not be the desirable title. Instead, the investors would want to have title by "tenants in common."

Nevertheless, the reader has a couple of options in the dissolution of this ownership. She could, as her former beau has requested with an attorney's letter, sign a quit-claim deed, signing over all ownership back to the other owner. In a divorce cases, this is the usual method of dividing property, but comes only after a separation agreement and a property settlement has been signed, sealed and delivered, via the court system. Finally, in the dividing of property, someone gets the house -- or the co-owners are forced to sell and divide the proceeds.

Here are a few resources in determining how you may want to hold title for your next purchase:

DivorceNet.com

FindLaw.com's Real Estate Center

Relocat.com (online comparison chart on how to title property)

Published: October 27, 2006

By M. Anthony Carr

Realty Times

AN ECONOMIC UPDATE

Last week’s big news for the financial markets came in the form of the employment report on Friday.

The unemployment rate unexpectedly dipped down from 4.6% to 4.4%. Job growth for October was reported at just 92,000, but the job numbers for the prior two months were revised upward substantially. In spite of the fact that the employment numbers have been notoriously unreliable and subject to frequent revision lately, when you look at the overall employment picture over the past year, it is clear that new jobs are being created and the unemployment rate has been dropping.

It would be natural to suppose that the financial markets would have reacted positively to the good news.

But, as with a lot of things in the markets, the connection is not quite that simple, direct or intuitive. The bond market is intensely concerned about whether inflation is peaking or just beginning its climb. Bond, stock and real estate investors have all pinned their hopes on the idea that the Federal Reserve will start cutting short term interest rates next spring to avert recession. But with employment going strong, that hope is dancing further and further out of reach. You may remember that a strong employment report in March 2004 set the stage for the 17 consecutive rate hikes we saw over the following 2 1/2 years.

Large-company stocks, represented by the S&P 500, fell 0.95% for the week.
The technology and small-cap oriented NASDAQ fell 0.84%, while non-US stocks fell 0.62% in US dollar terms. Treasury notes and mortgage-backed securities fell by more than 0.25% in price. Real estate investment trusts, an asset class widely believed to be overvalued in the first place, fell by 3% for the week.

The coming week has a relatively light calendar of economic releases, so the news will likely revolve around politics: the election and its aftermath.

However, it’s not clear that the election will have much impact on the markets either way. The conventional wisdom used to be that the financial markets prefer Republicans in power rather than Democrats, since Republicans are perceived as more pro-business. However, the waters have been muddied in recent years. The markets also seem to follow Thomas Jefferson’s adage, "That government is best which governs least." Through most of the 1990’s, we had divided government, with the Presidency held by one party and one or both houses of Congress held by the other. That led to political gridlock, and the markets and the economy thrived under a government that had its hands tied most of the time. The markets’ response to any of the more likely election outcomes this week will probably be muted, as the net impact, to the extent that it can be anticipated, has already been taken into account in securities prices.

Courtesy of Richard M. Crouse, Capital Markets and Louis Rose, ELB Mortgage Brokers

KEEP YOUR HOME FIRE-SAFE

Wildfires are no stranger to California homeowners, but no matter where you live, it's likely that the threat of a fire can occur. However, if you have taken precautions, there is a good chance you can prevent a fire from completely destroying your home.

“There are certainly wildfire issues all across the nation. East coast, Florida, has fires every year,” says Christopher Blaylock, Project Manager for Wildfire Education at San Diego Natural History Museum.

In San Diego, California, the Santa Ana winds cause tremendous problems during fire season. Just recently, the wildfire near the Palm Springs area took the lives of five firefighters while on the job.

It's a scary thought to consider that a fire can level your home in seconds. The best prevention is to know your environment, the risks of the area, and then prepare for the worst.

Some homeowners, who are building their own homes, never give it a second thought that where they are building could be dangerous.

“It's about a larger trend that is happening across the nation where there is increasing development into these wild land areas without necessarily the recognition that the natural environment has certain things like wildfire that may affect homes,” explains Blaylock.

Blaylock and the San Diego Natural History Museum are hosting a series of workshops in March 2007 called, “Protecting Homes and Communities from Wildfire: Preventative Cross-training Education for the Business Sector,” for businesses and professionals who work in and around home sites in the wild-land-urban interface.

“I used to work with the National Park out in Southern Missouri in the Ozark's National scenic river ways; their fire season is winter, that's when things get dry out there and that's when everything starts shriveling up and getting ripe for wildfire,” says Blaylock.

As a homeowner you can begin to make your home fire-safe with a few simple tasks.

“There is really no one thing that you can do that will guarantee that a home will survive a wildfire,” says Blaylock.

Instead he recommends looking at the big picture and protecting your home via several methods as well as understanding what can cause a home to burn.

Use Fire Safe Materials

When building a home or replacing a roof, use fire-safe and non-combustible materials. Look for materials such as brick, stucco, or Class A roofing that won't easily ignite and choose these over others. Also, use fire-resistant material to enclose the undersides of areas such as decks, eaves, and balconies that are located on slopes because, if they are left open, embers can land there and ignite a fire or flames can become trapped underneath the home.

Reduce Ember Penetration

It sounds a bit technical, but the bottom line is embers travel with the wind rapidly and to incredibly great distances. Homes in San Diego have burned because embers blew, maybe from a mile away, and then lodged into crevices of the home and ignited the house.

“When you're looking at your house [identify] where embers can get into the house or rest near the house and ignite something,” says Blaylock.

Embers tend to land on leaf piles, or “they get into your attic through the vents or something like that and they get to the insulated materials and are able to ignite,” says Blaylock.

Create a defensible/survivable space

Flames can get up to 100 feet high in extremely fire-prone conditions. “That's where the 100-foot clearance code comes from and it's important to understand that doesn't mean clear to the bare ground, but it's a matter of can you break up what we call contiguous fuels,” explains Blaylock.

For example, if you have very dense, dry brush around your home that can become contiguous fuel should a fire occur -- the brittle brush can become a path for the fire to follow and burn.

“If you could break up every other bush, the fire can't necessarily travel through it as fast or as hot. Therefore as the fire approaches the home you can reduce the flame length and the heat that the house is exposed to by maintaining your home in such a way as to accomplish that. That is commonly referred to as defensible space or survivable space,” says Blaylock.

Maintenance

Maintenance is extremely important. What is often the fire hazard is not the tree but rather the accumulation of leaves beneath it. The trees around a home can be beautiful, if they are well maintained; if not, what an uncared for tree leaves behind can be hazardous.

“If that particular tree, for whatever reason, has been neglected -- it isn't watered, so it's dry and it has very dry leaves -- maintenance is one of the biggest things homeowners can do [to prevent the loss of their home to fire],” says Blaylock.

Blaylock also recommends contacting your local fire marshal for information on protecting your home from fire. Additionally, he says always have an understanding of the environment you live in -- make sure you know how severe the fire-risk is in your neighborhood.

If you take the time now to make your home and its environment fire-safe, you'll be better prepared should a natural disaster occur and you'll likely have better odds of your home surviving it.

Published: November 6, 2006

By Phoebe Chongchua
Realty Times

CONGRESSIONAL COMMITTEE PROPOSES CRACKDOWN ON HOMEOWNER TAX WRITEOFFS

Have you been writing off your mortgage interest and real estate taxes correctly on your federal income tax filings? Or maybe not?

Whatever your answer, an influential Capitol Hill committee believes tens of thousands of homeowners have been deducting a lot more than they should -- to the tune of hundreds of millions of dollars a year.

Now the nonpartisan congressional Joint Committee on Taxation has proposed to the Senate and the House that they consider plugging two revenue-losing loopholes in the system, and crack down on homeowners who are deducting too much.

In a new report released last week, the staff of the committee recommends requiring local governments or mortgage lenders to annually report to the IRS the itemized details of the property tax payments claimed by millions of homeowners. Property tax deductions now cost the federal government $20 billion a year, according to committee estimates. A 1993 federal study found that approximately $400 million of that year’s property tax writeoffs were improperly claimed -- a figure that could easily be double that today.

Under current tax code rules, homeowners are permitted to write off local and state property taxes that are assessed on the basis of property valuations. But commonplace special levies and user fees -- for governmental services that mainly benefit individual houses or neighborhoods rather than the entire municipality -- are not deductible.

Special parkland improvements, sewers, sidewalks, garbage collections, landscaping, tennis courts and a long list of others sometimes are funded by tax levies on the property owners directly benefited. Local governments typically include their special benefit levies in with their regular property tax bills when they send them to homeowners, but they do not report the itemized breakdowns to the federal government.

The committee believes the IRS would be in a better position to audit homeowners’ tax deduction claims if the agency received an annual itemization -- either from local governments directly or from the mortgage lenders who typically disburse the tax payments from their borrowers’ escrow accounts. Since lenders already report total mortgage interest paid by each borrower to the IRS, the committee believes it would not be a major inconvenience to add in property tax itemizations with those reports.

The staff recommends that either local governments or mortgage lenders be required by federal law to provide the IRS with such itemizations annually.

The committee’s second target for real estate-related loophole closing involves home mortgage interest -- a $70 billion revenue-drain item in this year’s budget. The committee believes that many homeowners who refinance their mortgages improperly claim “points” on their interest deductions for the year of the refi. But IRS rules require refinance points -- interest paid in advance -- to be written off on a pro-rated basis over the life of the loan.

The committee also believes that homeowners who do cash-out refinancings may be writing off mortgage interest improperly -- claiming deductions on more than the $100,000 in home equity debt the tax code permits.

To close both loopholes, the committee proposes requiring all mortgage lenders and servicers to report whether new loans are refinancings, and whether the refi resulted in a new loan more than $100,000 larger than the mortgage it replaced.

The committee staff’s recommendations are often highly influential and find their way into law. So don’t be surprised if the new real estate proposals surface early in the new Congress next year for inclusion in a major tax bill.

Published: October 30, 2006

by Kenneth R. Harney
Realty Times

NAR RELEASES BABY BOOMER STUDY

Baby boomers are like the vaudevillian who doesn't know when to leave the crowd laughing. They have dominated the economy, housing, product development and just about every other trend since they arrived on the scene in 1946. But the party's over in about 12 years, when they will no longer be the largest population segment in history, nor the largest body of consumers. But until then, they remain the most powerful demographic force in the U.S., particularly when it comes to housing.

According to a new study by the National Association of Realtors® conducted by Harris Interactive, the generation born between 1946 and 1964 is living longer but has no set path for retirement, a finding that may have developers, builders and Realtors in a tizzy.

"The differences from past generations -- and between baby boomers themselves -- will have a significant impact on housing needs over the next 10 to 20 years that is very different from the World War II generation, and many boomers simply don't know how they'll retire," observes David Lereah, chief economist for the NAR. "A significant portion of baby boomers married later in life and had children at a later age, which means many will continue to work beyond the traditional retirement age. Older boomers are thinking about retirement, but one-third expect to go back and forth between periods of work and periods of leisure, and another 35 percent want to work at least part-time or start a business -- all of this will have an impact on the kind of homes they buy as well as where they buy them."

The median age at which baby boomers expect to stop working is 70, but 27 percent say they never intend to stop working. Just over one-quarter are ages 55 to 60.

He said most baby boomers are still in the workforce, and many have children living at home, which makes them a continuing force in the housing market.

"Because they will be in the workforce longer, boomers will postpone purchase of retirement property and won't be making those moves as early as assumed," Lereah said.

Peter Francese, an independent demographic trends analyst and founder of American Demographics magazine, consulted on the findings. "For the vast majority of baby boomers, retirement is somewhere off in the future," he said. "Considering that boomers are healthier than their predecessors, and are more likely to work in an office setting, many of them may work five or 10 years beyond the traditional retirement age of 65," he said.

Given a longer tenure in the work force baby boomers may choose a larger home than earlier generations, speculates Francese. "Boomers may want or need a somewhat larger dwelling that includes one or two home offices, and a low-maintenance home on a single level would have broad appeal to this group," Francese said.

Not surprisingly, most boomers live in two-income households, with a median income in 2005 of $64,700, which is 31 percent higher than the median for all households. This generation makes up 37.5 percent of U.S. households, but receives nearly half of all aggregate household income. "This translates into a lot of purchasing power, and helps to explain why 8 out of 10 boomers are homeowners," Lereah said.

For baby boomers earning $100,000 or more, the study shows that more than 9 in 10 are homeowners. Among middle-income boomer homeowners, home equity accounts for fully half of their net worth. Even so, 19 percent of respondents are renters, 37 percent say they have just enough to make ends meet and 17 percent say they are having financial difficulty.

A quarter of baby boomers own one or more other kinds of real estate in addition to a primary residence: 13 percent own land, 8 percent own rental property, 7 percent a vacation home or seasonally occupied property, 2 percent commercial real estate and 3 percent some other kind of real estate. Four out of 10 respondents intend to convert their vacation home into a primary residence in retirement. Analysis by NAR shows baby boomers are proportionately more active in the second home market, owning 57 percent of all vacation/seasonal homes and 58 percent of rental property.

Ten percent of boomers indicate they plan to buy some form of real estate within the next year, which corresponds with Census data that shows 3.5 million boomer households moved during the last year. Two-thirds are considering a primary residence, but the rest are thinking about land, second homes or commercial property.

Most survey respondents were unsure of their financial future, says NAR, with three-quarters saying they are not financially prepared for retirement and many expressing anxiety about their ability to retire. Some boomers said they might withdraw retirement funds for housing or real estate expenses.

Where boomers will retire is uncertain. Half of boomers who live in an urban area would like to retire in a small town or rural area. Their ideal retirement location characteristics include a lower cost of living, being near family, quality health care, better climate and being near a body of water.

More than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities. Half of boomers said they would consider living in an age-restricted community.

Almost one in four boomer households have a high net worth of $500,000 or more, and this ratio is expected to increase in the future as the generation ages. Virtually all high-net-worth households are homeowners (97 percent), and 47 percent are likely to also own other real estate in addition to their primary residence. More than a third expect to help children or grandchildren with a downpayment on a home. Wealthier boomers want amenities where they retire, including cultural activities such as museums and art galleries. As a result, they are more likely to retire in an urban area or city.

Although most boomers are married couples and 27 percent have children under the age of 18, nearly two out of five baby boom households are nontraditional households, most of which are headed by women.

This changing demographic raises interesting ideas. Nontraditional households may have different needs and desires about where they want to live. Twenty percent of boomer households are headed by women, but because women aged 60 to 69 account for a quarter of homeowners in that age group, the number of women boomer homeowners is likely to increase much faster than average as they age.

For boomers with children, neighborhood schools are of obvious concern, but for those without children or grown children (3 out of 4), security may be a bigger issue.

In a similar study by the Mortgage Bankers Association, it was found that 43 million households headed by someone age 50 or older were owned as a main residence, and 6.6 million age 50 or older own a second home. The rate of second home ownership among boomers was flat between the years of 1992 and 2004, and only 12 percent of respondents said they intended to sell their main home and use their second home as a primary address. Even so, the MBA predicts that baby boomers will add 2 million second homes to their portfolios.

The good news for the real estate industry is that one out of four baby boomers between the ages of 50 and 60 intend to buy some form of real estate within the next 12 months; and the percentage jumps to 37 percent among the same age group with incomes at $100,000 or above.

But don't necessarily look for boomers to buy the most expensive homes. As they eye retirement, they are also considering affordability. Already 67 percent of those age 50 to 60 worry that housing costs could spiral beyond their reach.

Editor's note: The study can be ordered by calling 800/874-6500, or online. The cost is $50 for NAR members and $125 for nonmembers.

Published: October 30, 2006

by Blanche Evans

Realty Times